Desirability, feasibility, viability.
These are the three startup qualities 7 young companies attempted to prove Monday at the inaugural Demo Day for Citrix Startup Accelerator’s Raleigh Innovators Program. In three months, the Raleigh innovators fine-tuned business models that tackle overcrowded email inboxes, the cost and quality of video streaming services, home health care management, event video production, too much software (and too many passwords), cord-intense video conferencing and startup talent recruitment. (More on them in a subsequent article.)
The program, which began earlier this year in Silicon Valley, is open to startups and corporate teams building mobile, cloud and collaboration products for business. Each receives a $25,000 grant from the program’s sponsors and three months of mentorship and office space at Citrix’s downtown Raleigh office.
The Innovators Program is new to Citrix, a way to build a network of innovators around the world and vet out potential investments. Last month, it started a program in Bangalore, India, and the accelerator’s managing director John McIntyre told the crowd gathered Monday that more cities would be added in 2015. The Raleigh program will be continued in 2015.
But in many ways, the program, like its innovators, must also prove desirable, feasible and viable. The proliferation of accelerators has been well noted in the national media and many have yet to prove successful. A year ago, a TechCrunch analysis found that 27 percent of accelerator grads raised follow-on funds in the year post-accelerator, and 36 percent raised funds within five. Most from non-prestigious accelerators (like Y Combinator and TechStars) failed. Locally, The Startup Factory founders admit that only now, after three years of accelerating companies, are they confident in the program’s structure, criteria and early wins. Accelerators are risky.
It’s too early to tell how effective this program will be in accelerating young companies—only one company graduated with funds in hand and an executive committee at Citrix will decide whether its two internal projects continue.
But there are some benefits to a corporately funded and supported program like Citrix’s, both for the Triangle and the startups involved.
- It’s an avenue for corporations to get involved as sponsors, mentors and participants. One criticism of the Triangle’s entrepreneurial ecosystem has been the lack of corporate involvement. Corporations have been slow to test or adopt the technologies created by local startups. They’ve provided few mentors to accelerator or other entrepreneurship education programs. And they aren’t super active in M&A in this region. Citrix’s sponsorship of the program prompted Red Hat to get involved this year. It also opened applications to innovative teams within corporations. It’s providing a good example for other corporations, and a clear path to get involved.
- It plays to the region’s strength in B2B software. Most of this region’s big startup successes—Digitalsmiths, Appia, Bronto, iContact, ChannelAdvisor, Automated Insights—have been in enterprise or software for business. The Startup Factory seems to have developed a niche accelerating marketplace startups with both consumer and business verticals. But it accepts just 10 startups a year, taking applications from around the nation. Two Triangle startups have traveled to Dallas to take advantage of its Tech Wildcatters B2B accelerator. It’s clear there’s need for more targeted help to innovators in the B2B space. And there’s the existing talent here to provide it.
- It’s a natural way for the city of Raleigh to get involved. Months ago, the city allocated $100,000 in grant funds to support the growing startup community. It wasn’t clear how the funds would be spent, but Raleigh’s economic development manager James Sauls told me Monday that a portion would be awarded to Citrix accelerator grads who agree to locate in Raleigh following the program. The Citrix Accelerator gives the city a way to vet potential grantees and deploy taxpayers’ money in a responsible way.
- Local startups get access to Silicon Valley and other startup centers. Citrix’s mission is to build a network of innovators around the world, involving its various operating divisions and potentially making larger investments. It also may attract additional corporate partners. If Citrix makes good on its promise to further support the innovators, that could mean access to potential clients, partners or acquirers throughout its growing network.
- Venture capitalists can vet more deals. Local investors traditionally favor B2B versus consumer opportunities. So another accelerator focused on the segment gives them more entrepreneurs to meet and counsel during the accelerator program, and consider for investment following. Accelerators are also good feeders to the NC IDEA grant program. And outside investors may be drawn to a startup with a company like Citrix testing or implementing its technology (as will be the case with several of yesterday’s graduates).
- Startups get help, without giving up shares. Citrix provides grants and space to the startups during the program, providing a low-risk way for them to explore a startup opportunity without sacrificing shares in the company. Also, it’s only three months. If hypotheses prove wrong, they can quickly move on to another plan or career path.
- It’s not investment-based, so corporations and the community could sustain it. This is an important point that could be positive or negative for Raleigh. The program isn’t generating Citrix any revenue (unless it acquires a hugely successful Raleigh startup), so the corporation could eventually decide not to fund it. But with Red Hat, HQ Raleigh and the city of Raleigh involved, it could set the groundwork for a community effort to support startup growth, and not tied to a successful investment portfolio.
The seven companies focused their pitches on key learnings from the three-month program, making it pretty clear they found it beneficial. But the true test—the ability to earn funding from investors or revenue from customers—will happen in the months and years to follow. In the meantime, Citrix is helping to create an important pipeline of B2B startups into Raleigh, and the greater Triangle area.